The Interactions between the Credit Default Swap and the Bond Markets in Financial Turmoil

We analyse the links between credit default swap (CDS) and bond spreads in order to determine which one is the leading market in the price discovery process. To do that, we construct a sample of CDS premia and bond spreads on a generic 5‐year bond for 17 financials and 18 sovereigns. First, we run panel vector error correction model estimations, showing that the CDS market has a lead over the bond market for financial institutions. This also holds for high‐yield sovereigns, whereas the reverse is found for low‐yield sovereigns in the core of the euro area. We interpret these results according to the relative liquidity of both markets for different types of entities. Second, we check for nonlinearities in the adjustment process. Results show that the CDS market's lead is amplified when default risk increases, during crisis periods, as well as continuously when CDS premia increase.     

Does Euro or Dollar Pegging Impact the Real Exchange Rate? The Case of Oil and Commodity Currencies

The aim of this paper is to investigate the equilibrium exchange rates for commodity and oil currencies as well as the discrepancies of their observed exchange rates to these equilibriums. To this end, first, we estimate a long‐term relationship between the real effective exchange rate and economic fundamentals, including the commodity terms of trade. The estimation relies on panel cointegration techniques and covers annual data from 1980 to 2007. Our results show that real exchange rates co‐move with commodity prices in the long run and respond to oil price somewhat less than to commodity prices. Second, we assess the degree of misalignment of these currencies, as the gap between their observed exchange rate and the estimated equilibrium exchange rate. We show that these misalignments are not significantly related to the exchange rate regimes adopted by the countries, either pegged or floating. However, for pegged currencies, the size of misalignments significantly depends on the anchor currency, either the euro or the dollar. A comparison of misalignments of pegged commodity and oil currencies across different periods confirms these results: during periods of dollar (euro) overvaluation, currencies pegged to the dollar (euro) tend to be overvalued; the reverse being true when the dollar (euro) is undervalued. Consequently, pegged currencies are often driven away from their equilibria by wild fluctuations in the key currencies, on which they are anchored.     

Introduction: Postnational Politics in the European Union

During the Cold War, “buffer” or “bastion” seemed a popular metaphor to describe Turkey. After the Cold War, “bridge,” (and, to some extent, the “crossroad”) metaphor started to dominate the Turkish foreign policy D??course. This article traces the use of “bridge” metaphor in this D??course in the post-Cold War period by the Turkish foreign policy elite. It develops two arguments. First, the word bridge is a “metaphor of vision” combining Turkey's perceived geographical exceptionalism with an identity and a role at the international level. As a “metaphor of vision,” the employment of the word “bridge” highlighted Turkey's liminality and justified some of its foreign policy actions to Eurasia and then to the Middle East. Second, because the bridge metaphor was used in different context to justify different foreign policy choices, its meaning has changed, illustrating that metaphors are not static constructs. It concludes by Say?ng that the continuous use of “bridge” metaphor might reinforce Turkey's “liminality,” placing Turkey in a less classifiable category than the regular “othering” practices.     

Was the Currency Crisis in Argentina Self-Fulfilling?

The aim of this paper is to investigate whether the 2002 crisis in Argentina was, at least to some extent, self-fulfilling. The theoretical basis we refer to is the so-called “second-generation” models. We use a Markov-switching model that allows us to empirically estimate the role played by fundamentals and/or shifts in devaluation expectations. Our results suggest that shifts in expectations have induced the crisis. However, because deteriorating fundamentals are also significant, we conclude that the collapse of the peg has been partly driven by adverse fundamentals and that abrupt shifts in devaluation expectations have forced a premature exit. JEL no. C22, D84, F31     

Mill versus Jevons on traditional sexual division of labour: Is gender equality efficient?

Abstract

The question of the legitimacy of traditional sexual division of labour receives growing attention from contemporary economists. In particular, a debate takes place between the “New Home Economics”, which stresses the efficiency of the traditional arrangement and economists questioning the justice of the relations between sexes. The same kind of opposition appears between two Victorian economists: J.S. Mill and W.S. Jevons. Although both are utilitarian, they adopt contrary views about the relative importance of efficiency and justice in the definition of appropriate gender relations. While Mill aims at conciliating justice and utility, Jevons considers that utility outweighs justice.     

After Van Gogh: The Geopolitics of the Tsunami Relief Effort in the Netherlands

The paper examines the Dutch humanitarian response to the 2004 Indian Ocean earthquake through the lens of geopolitics. It analyses the ways geopolitical representations shape non-state collective action, in this case the relief effort to help victims of the tsunami of 26 December 2004. Drawing on earlier work on geopolitical visions and national identity, the paper develops a framework to study people's geopolitics, the geopolitics of non-state collective actions. These insights are further explored through an examination of the Dutch tsunami relief effort. The paper discusses how the Dutch media framed this collective action as a national effort and articulated a sense of proximity and responsibility to mobilise people's generosity. Dutch geopolitical vision and national identity (water as a major threat to the national territory, the country's role as development aid donor, its relation to the regions affected) offer a frame to mobilise people. The tsunami is also analysed as a critical event for Dutch geopolitical representations and the tsunami relief effort as a peak experience providing a sense of recovered national identity in times when Dutch society was painfully divided between Muslims and non-Muslims after the murder of Theo van Gogh in November 2004. The concluding section discusses directions for further research into people's geopolitics.